Live Markets-Will a Fed hike end the bull market?

Investors bracing for the first Federal Reserve interest-rate hike of the cycle may want to keep history in mind.

Citi notes tighter policy is becoming global, with the Fed, Bank of Japan, European Central Bank and Bank of England all turning more hawkish as bond yields climb and inflation risks build. U.S. 10-year yields above 5% and geopolitical tensions have added to concerns about a more stagflationary backdrop.

Yet the bank says Fed tightening cycles since the 1970s show global equities typically wobble around the first hike before continuing to rise over the following six to 12 months.

"It is not the first Fed hike that ends equity bull markets, although it does inject near-term volatility," write Citi strategists led by David Groman.

They add Wall Street has tended to underperform after the first hike, while Japan and Europe typically fare better, with value generally outperforming growth.

More important, however, may be why yields are rising.

"Equities can better digest higher bond yields when growth stays resilient, while falling inflation also helps," they say, adding that de-escalation in the U.S.-Iran conflict remains key.